European stocks rally after ECB and Fed holds

Stocks in London closed higher on Thursday, as investors weighed earnings, rate calls in Europe and the US and a hefty share price fall for Google owner Alphabet.

In London, the FTSE 100 Index ended up 27.57 points, 0.3%, at 10,722.07.

The FTSE 250 ended 34.90 points higher, 0.1%, at 24,674.16, and the AIM all-share advanced 2.53 points, 0.3%, at 763.45.

In European equity markets on Thursday, the CAC 40 in Paris ended up 1.1%, while the DAX 40 in Frankfurt climbed 1.3% after the European Central Bank’s decision to leave interest rates unchanged.

The central bank maintained its deposit facility rate at 2.50%, the main refinancing operations rate at 2.65% and the marginal lending facility rate at 2.90%, as it warned that rising energy prices could push inflation higher while weighing on economic growth.

“Energy prices have continued to rise, posing upside risks to the inflation outlook and downside risks to the growth outlook,” the ECB said.

Thursday’s decision came hours after ECB president Christine Lagarde announced that she would step down on February 7 2027, eight months before her term was due to expire in October.

Ms Lagarde, who has led the central bank since November 2019, informed the Governing Council and European Council president Antonio Costa of her decision, setting the stage for a leadership contest at a critical time for eurozone monetary policy.

JPMorgan analyst Greg Fuzesi observed: “The decision was expected by financial markets with the expectation that an interest rate hike will follow in December.”